Easter shopping expected to boost retail sector

Township and rural malls present growth opportunities
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The Easter shopping season is expected to boost the retail sector this year. This is according to the latest mixed method research study conducted by Capital Connect which also noted a sharp increase in the sector brought about by popular international retailers.

The Capital Connect study predicts a turnover increase of R2.2 billion for the entire retail sector during the Easter period.

All retail sectors showed negative growth in 2023 but according to the latest study, there is a clear turnaround happening this year.
Last year, consumers felt the pressure of the weak economy which impacted their ability to spend.

This year, growth is expected to average 1.5% up from a mere 0.5% in 2023.

Professor Carel van Aardt of the Bureau of Market Research explains: “What you saw last year was that consumers really became much more financially vulnerable. There are a lot of things impacting on that, just remember that the wage hikes that consumers received last year were substantially lower than in the past. There is also a lot of consumers who lost their jobs last year, also there was still significant employment growth last year. A lot of the employment growth was not in the formal employment sector of the economy but the survivalists in the informal sector of the economy. Consumers found that their debt because of interest rates was higher were so much more, that put a strain on their finances.”

Sanisha Packirisamy Momentum Investments Economist says, “An expected reduction in interest rates in the second half of this year should help to alleviate the debt burden of middle and higher income earners with mortgage and vehicle related debt, while a further reprieve in inflation should boost real wages for workers across the board.”

Turnaround for retail sector

However, the easter shopping season is expected to signal the start of a turnaround for the retail sector. General dealers are expected to see real retail sales grow by 1.5% during 2024.

Specialist food, beverages and tobacco stores are forecast to capture around R521 million in additional sales over Easter. Real sales growth by textiles, clothing, footwear and leather goods dealers is expected to reach 1.0% this year.

Household furniture, appliances and equipment dealers are expected to capture around R151 million in additional sales.

“What we are forecasting is that consumers will spend more than they did last year. There is currently high levels of employment growth as well as high levels of compensation growth. When you look at what consumers are buying, they’re firstly buying essentials because a lot of them are still incredibly vulnerable, this is also a shopping season when there are specials on offer. But remember it’s also party season. A lot of them are buying things like confectionary more, sweets etc. So you’re general dealers will definitely be benefitting from the essentials being bought,” says Professor Van Aardt.

“Going into the easter weekend, we would expect retail sales activity to remain reasonably sluggish, as negative growth in real wages and restrictive financial conditions persist. However, conditions should improve later in the year. We expect growth in household spending to improve marginally this year from 0.7% to 1.2% but we are likely to see continued pressure on purchases of high ticket items such cars and large household appliances,” adds Packirisamy.

Van Aardt says clothing purchases from popular over seas retailers such as SHEIN and Temu are increasing at a faster pace.
The two online marketplaces, have reported a significant increase in orders from South Africa, even causing logistical challenges for their courier partner.

“We see more and more of buying clubs. Buying clubs in the sense that various people are clubbing together with respect to single purchase and bringing into the country. More and more we are seeing that a lot of people are buying that not for own consumption but to re-sell them. We have actually done a tracking in South Africa to see to what extent goods bought from especially these two international retailers. We’ve been tracking, they are actually being bought and resold in South Africa and what are the profit margins associated with that. What’s fascinating in that regard is that even when the profit margin is added that it’s still lower than what on offer in South Africa.”

Capital Connect encourages retailers to optimise their businesses well before the start of a busy season like Easter to get the best possible results.

It says the critical success factors include a strong brand culture, solid upselling and cross-selling strategies and fine-tuning marketing.

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